If not 3 fund, whats your strategy ?

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SmyleBogle
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Joined: Mon Nov 04, 2019 3:24 pm

If not 3 fund, whats your strategy ?

Post by SmyleBogle » Wed May 27, 2020 5:49 pm

First of all, I would concur 3 fund portfolio as balanced approach to market investing. :sharebeer

Having said that, from https://www.bogleheads.org/wiki/Three-fund_portfolio, recommended Vanguard funds:

Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)

Observing threads on this forum, people do tend to follow variations of 3 fund strategy (be it different funds or efts or stocks than recommendations above in the wiki) or completely different combination of different index funds, etf, stocks.

Given that no strategy is right or wrong (who knows about individual risk appetite or the future)...

What's your strategy been and what are your gains or lessons learned over your investing timeframe?
:moneybag

bck63
Posts: 1166
Joined: Fri Sep 28, 2018 4:59 pm

Re: If not 3 fund, whats your strategy ?

Post by bck63 » Wed May 27, 2020 6:36 pm

SmyleBogle wrote:
Wed May 27, 2020 5:49 pm
First of all, I would concur 3 fund portfolio as balanced approach to market investing. :sharebeer

Having said that, from https://www.bogleheads.org/wiki/Three-fund_portfolio, recommended Vanguard funds:

Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)

Observing threads on this forum, people do tend to follow variations of 3 fund strategy (be it different funds or efts or stocks than recommendations above in the wiki) or completely different combination of different index funds, etf, stocks.

Given that no strategy is right or wrong (who knows about individual risk appetite or the future)...

What's your strategy been and what are your gains or lessons learned over your investing timeframe?
:moneybag
Essentially a two-fund portfolio: S&P 500 fund, combined with a few different bond funds, depending more or less on my time horizon. So it's S&P plus bond fund.

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CyclingDuo
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Re: If not 3 fund, whats your strategy ?

Post by CyclingDuo » Wed May 27, 2020 6:37 pm

SmyleBogle wrote:
Wed May 27, 2020 5:49 pm
First of all, I would concur 3 fund portfolio as balanced approach to market investing. :sharebeer

Having said that, from https://www.bogleheads.org/wiki/Three-fund_portfolio, recommended Vanguard funds:

Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)

Observing threads on this forum, people do tend to follow variations of 3 fund strategy (be it different funds or efts or stocks than recommendations above in the wiki) or completely different combination of different index funds, etf, stocks.

Given that no strategy is right or wrong (who knows about individual risk appetite or the future)...

What's your strategy been and what are your gains or lessons learned over your investing timeframe?
:moneybag
The important thing is to pick a strategy that you can stick with over the years. That, and regular contributions from your income into the investments within your strategy is what will get you to your end goals.

Unfortunately, if we are to believe what was posted on the forums over the past few months, there were way too many bailing ship, freaking out, succumbing to gloom and doom, etc... during this crisis as they perhaps did not have a strategy they could stick with. Markets dive, on average, 30%+ every 5 years or so. The 34% dive into March 23rd certainly fit the bill.

Image

I guess that's the lesson our household would love to pass on as we've been through a few SWAN dives over the years. Not saying this one hasn't been unique due to the narrative, but there will be many more in the years to come for investors. A strategy you can stick with - be it the three funder or something else - is key to reaching your long term goals.

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Olemiss540
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Re: If not 3 fund, whats your strategy ?

Post by Olemiss540 » Wed May 27, 2020 7:26 pm

1 fund portfolio (target retirement). No need to tinker and risk behavioral mistakes when savings rate and market performance is all I am chasing!

Ask yourself why market returns would outpace 80%+ of investors portfolios.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Dominic
Posts: 374
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Re: If not 3 fund, whats your strategy ?

Post by Dominic » Wed May 27, 2020 7:31 pm

I replace Total Bond with Extended-Duration Treasuries for additional duration and quality.

I replace Total International with Total Developed and Total Emerging to tilt gently towards emerging markets and gain exposure to A-shares.

I add S&P 600 Value to gain modest exposure to the small and value premiums.

Still a simple portfolio with low expenses, but it is more diversified from a risk factor perspective.

cheesepep
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Re: If not 3 fund, whats your strategy ?

Post by cheesepep » Wed May 27, 2020 7:33 pm

100% individual stocks, most of them dividend paying. I have less than 10 stocks and most of the time, less than 7.

Triple digit golfer
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Joined: Mon May 18, 2009 5:57 pm

Re: If not 3 fund, whats your strategy ?

Post by Triple digit golfer » Wed May 27, 2020 7:34 pm

Olemiss540 wrote:
Wed May 27, 2020 7:26 pm
1 fund portfolio (target retirement). No need to tinker and risk behavioral mistakes when savings rate and market performance is all I am chasing!

Ask yourself why market returns would outpace 80%+ of investors portfolios.
I would use the one fund option, but my 401k has high fees for target fate funds and I also have a taxable account. Otherwise, I'd use a target date option without hesitation. I recently set my sister in law up with her first retirement account with a Vanguard Target 2060 fund in her Roth IRA. I told her add money and don't think about it for 3 decades. She is not a high income earner and knows absolutely nothing about investing, but she is a conscious saver. That's the beauty of a one fund option. Add to it regularly and you're done. It's a brilliantly simple strategy.

nix4me
Posts: 600
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Re: If not 3 fund, whats your strategy ?

Post by nix4me » Wed May 27, 2020 7:35 pm

right now:
Stocks (S&P 500/Total Stock): 96.93%
REIT (FREL): 0.22%
Bonds (SCHZ): 0.01%
Cash: 2.84%

Ferdinand2014
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Re: If not 3 fund, whats your strategy ?

Post by Ferdinand2014 » Wed May 27, 2020 7:43 pm

SmyleBogle wrote:
Wed May 27, 2020 5:49 pm
First of all, I would concur 3 fund portfolio as balanced approach to market investing. :sharebeer

Having said that, from https://www.bogleheads.org/wiki/Three-fund_portfolio, recommended Vanguard funds:

Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)

Observing threads on this forum, people do tend to follow variations of 3 fund strategy (be it different funds or efts or stocks than recommendations above in the wiki) or completely different combination of different index funds, etf, stocks.

Given that no strategy is right or wrong (who knows about individual risk appetite or the future)...

What's your strategy been and what are your gains or lessons learned over your investing timeframe?
:moneybag
My strategy has been to simplify, reduce costs and automate my investments and contributions as much as possible to thwart succumbing to my behavioral tendencies.
This includes:

1.) Only one fund - a low cost S&P 500 index
2.) Cash enough to sleep at night
3.) No ETF’s
4.) All of my contributions and investments on automatic contribution
5.) No asset allocation percent
6.) No rebalancing

The lesson I have learned is that behavior has a much bigger drag on portfolio returns than the idealized perfect portfolio. Pick something that is reasonably diversified and stick with it.
Last edited by Ferdinand2014 on Wed May 27, 2020 7:48 pm, edited 1 time in total.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

WhatsIRR
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Re: If not 3 fund, whats your strategy ?

Post by WhatsIRR » Wed May 27, 2020 7:46 pm

cheesepep wrote:
Wed May 27, 2020 7:33 pm
100% individual stocks, most of them dividend paying. I have less than 10 stocks and most of the time, less than 7.
How are you picking and exiting individual stocks?

I’m following 3 fund in our IRAs and 401ks but am playing with dividend stocks in my taxable account (I know, I know... slowly converting over). I’m looking for exits to move more into funds but haven’t came up with a good plan.

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David Jay
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Location: Michigan

Re: If not 3 fund, whats your strategy ?

Post by David Jay » Wed May 27, 2020 8:06 pm

Olemiss540 wrote:
Wed May 27, 2020 7:26 pm
1 fund portfolio (target retirement). No need to tinker and risk behavioral mistakes...
Same here, I use a LifeStrategy fund because I have already passed my Target date.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

nanameg
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Re: If not 3 fund, whats your strategy ?

Post by nanameg » Wed May 27, 2020 8:07 pm

Olemiss540 wrote:
Wed May 27, 2020 7:26 pm
1 fund portfolio (target retirement). No need to tinker and risk behavioral mistakes when savings rate and market performance is all I am chasing!

Ask yourself why market returns would outpace 80%+ of investors portfolios.
Not clear what u mean by saying “ ask yourself why market returns would outpace 80%+ of investor’s portfolios”?

Are u saying 80% + of investors use target funds? I’m confused.

RJC
Posts: 564
Joined: Fri Dec 14, 2018 1:40 pm

Re: If not 3 fund, whats your strategy ?

Post by RJC » Wed May 27, 2020 8:11 pm

100% VTSAX or S&P500 (if a TSM fund is not available) and a large EF.

IMO this is the most efficient strategy as long as you are at least 10+ years from retirement. No tinkering.

Triple digit golfer
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Re: If not 3 fund, whats your strategy ?

Post by Triple digit golfer » Wed May 27, 2020 8:16 pm

nanameg wrote:
Wed May 27, 2020 8:07 pm
Olemiss540 wrote:
Wed May 27, 2020 7:26 pm
1 fund portfolio (target retirement). No need to tinker and risk behavioral mistakes when savings rate and market performance is all I am chasing!

Ask yourself why market returns would outpace 80%+ of investors portfolios.
Not clear what u mean by saying “ ask yourself why market returns would outpace 80%+ of investor’s portfolios”?

Are u saying 80% + of investors use target funds? I’m confused.
It is a market matching strategy, extremely low cost, and avoids behavioral tendencies to tinker.

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Phineas J. Whoopee
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Re: If not 3 fund, whats your strategy ?

Post by Phineas J. Whoopee » Wed May 27, 2020 8:25 pm

I use three-fund plus TIPS. The allocation is:

25% Total US stock
15% Total international stock
40% inflation-protected fixed income
20% nominal fixed income.

PJW

Dontridetheindexdown
Posts: 124
Joined: Sat Feb 14, 2015 10:08 pm

Re: If not 3 fund, whats your strategy ?

Post by Dontridetheindexdown » Wed May 27, 2020 8:44 pm

Since you asked...

Yes, I agree the 3-fund portfolio (actually 2 fund, VTSAX and VBTLX are all you need) with individual asset allocation, is right for most folks.

DW and I are Bogleheads in so many ways - live modestly, invest assiduously, re-balance regularly, stay the course.

Right now, we are 48% equities (exactly 3 firms), and 52% stable assets (Vanguard Treasury Money Market in taxable, TSP G Fund in tax deferred).

We re-balanced from 66% equities to 50% equities in JAN 2020 because we reached our re-balance threshold.

Our 3-firm equity portfolio includes 3 best-in-class, all-weather firms we have held for almost 40 years.

We automatically re-invest dividends, and about once every year or 2, dependent on growth or decay, we re-balance between firms.

We understand the non-diversified equity risk, and we sleep well at night with 16% of our holdings in each of 3 high-dividend, consumer-essential firms.

Before our most recent re-balancing, we slept just as well with 22% of our holdings in each of our chosen firms.

Our equity investments comprise our hedge against inflation.

We understand our stable asset risk (inflation), and we sleep well at night knowing our stable assets comprise our hedge against recession.

We live on mailbox money - 2 Social Security Old Age annuities, 2 modest defined benefit pensions (COLA adjusted), and a small SPIA.

We fully understand the risks associated with non-diversification of equity assets, and the concomitant risk of possibly decaying stable assets.

In short, we are delighted with our strategy.

We currently re-invest about 2-times our living expenses each year.

When RMD time occurs, we intend to pay the tax and invest the remainder.

There are so very many paths to retirement - we respect the choices others make, and we feel secure with our own choices.

We are presently 41% taxable (31% equities, 10% stable assets), 42% tax-deferred (stable assets), and 17% Roth (equities).

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David Jay
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Re: If not 3 fund, whats your strategy ?

Post by David Jay » Wed May 27, 2020 8:52 pm

nanameg wrote:
Wed May 27, 2020 8:07 pm
Olemiss540 wrote:
Wed May 27, 2020 7:26 pm
1 fund portfolio (target retirement). No need to tinker and risk behavioral mistakes when savings rate and market performance is all I am chasing!

Ask yourself why market returns would outpace 80%+ of investors portfolios.
Not clear what u mean by saying “ ask yourself why market returns would outpace 80%+ of investor’s portfolios”?

Are u saying 80% + of investors use target funds? I’m confused.
Meg:

80% of investors under-perform the market. Many of the reasons are behavioral: When it comes to investing, humans seem to be wired to do the wrong thing (see “risk aversion” and “flight response”, for instance).

I believe that Ole’ Miss is saying that a single “fund-of-funds” like a Target Date does the rebalancing for you, so one is not tempted to make emotion based changes.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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calmaniac
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Re: If not 3 fund, whats your strategy ?

Post by calmaniac » Wed May 27, 2020 8:55 pm

5 funds:
• S&P 500
• Small cap value/value
• International LG CAP
• Emerging markets
• Short/medium term US bonds

See allocation in signature block.

It seems likely that we will not need most of it, so investing for the long term for legacy giving.
Last edited by calmaniac on Wed May 27, 2020 8:58 pm, edited 1 time in total.
62 yo, 1-3y til retire. AA 70/30: 30% S&P, 16% value, 14% intl, 10% EM, 30% short/int govt bonds. DW & my Fed pensions now ≈60% of expenses. Taking SS @age 70--> pension+SS ≈100% of expenses.

chuckb84
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Location: New Mexico

Re: If not 3 fund, whats your strategy ?

Post by chuckb84 » Wed May 27, 2020 8:56 pm

If you download simba's backtesting spreadsheet, you'll get a lot of ideas.

https://bit.ly/2xcKBHt

If you look at the Lazy Portfolios tab, it looks like 50/50 Wellesley/Wellington would be very good. The ER is a little higher than I like, but a bargain for well-managed funds.

Ferdinand2014
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Re: If not 3 fund, whats your strategy ?

Post by Ferdinand2014 » Wed May 27, 2020 8:59 pm

Dontridetheindexdown wrote:
Wed May 27, 2020 8:44 pm
Since you asked...

Yes, I agree the 3-fund portfolio (actually 2 fund, VTSAX and VBTLX are all you need) with individual asset allocation, is right for most folks.

DW and I are Bogleheads in so many ways - live modestly, invest assiduously, re-balance regularly, stay the course.

Right now, we are 48% equities (exactly 3 firms), and 52% stable assets (Vanguard Treasury Money Market in taxable, TSP G Fund in tax deferred).

We re-balanced from 66% equities to 50% equities in JAN 2020 because we reached our re-balance threshold.

Our 3-firm equity portfolio includes 3 best-in-class, all-weather firms we have held for almost 40 years.

We automatically re-invest dividends, and about once every year or 2, dependent on growth or decay, we re-balance between firms.

We understand the non-diversified equity risk, and we sleep well at night with 16% of our holdings in each of 3 high-dividend, consumer-essential firms.

Before our most recent re-balancing, we slept just as well with 22% of our holdings in each of our chosen firms.

Our equity investments comprise our hedge against inflation.

We understand our stable asset risk (inflation), and we sleep well at night knowing our stable assets comprise our hedge against recession.

We live on mailbox money - 2 Social Security Old Age annuities, 2 modest defined benefit pensions (COLA adjusted), and a small SPIA.

We fully understand the risks associated with non-diversification of equity assets, and the concomitant risk of possibly decaying stable assets.

In short, we are delighted with our strategy.

We currently re-invest about 2-times our living expenses each year.

When RMD time occurs, we intend to pay the tax and invest the remainder.

There are so very many paths to retirement - we respect the choices others make, and we feel secure with our own choices.

We are presently 41% taxable (31% equities, 10% stable assets), 42% tax-deferred (stable assets), and 17% Roth (equities).
What 3 firms?
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

REITired
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Re: If not 3 fund, whats your strategy ?

Post by REITired » Wed May 27, 2020 9:20 pm

my core is:

Fidelity 500 Index Fund (FXAIX) 25%
Fidelity Extended Market Index Fund (FSMAX) 25%
Fidelity Total International Index Fund (FTIHX) 25%
Fidelity US Bond Market Index Fund (FXNAX) 25%

bloom2708
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Re: If not 3 fund, whats your strategy ?

Post by bloom2708 » Wed May 27, 2020 9:22 pm

3 funds:

Total US
Mid-cap
Int-term Treasuries

I do have Emergency Fund in savings/money market.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

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1789
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Re: If not 3 fund, whats your strategy ?

Post by 1789 » Wed May 27, 2020 10:53 pm

One year worth of expenses in CASH. Everything else is in US TSM/SP500 whichever available.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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pokebowl
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Re: If not 3 fund, whats your strategy ?

Post by pokebowl » Wed May 27, 2020 11:25 pm

I attempt to follow the FTSE Global Total Cap Index. Currently no index fund exists for it specifically, but I can pseudo achieve tracking it using Vanguard's total world index fund (which follows an all-cap index). I primarily hold the total world fund in my tax advantaged accounts. I have it broken up into Total U.S and Total international respectively in my brokerage for tax reasons.

So my current portfolio is:

Taxable:
- Total Market
- Total international
- Several single stock holdings

Tax advantaged:
- Total international
- Total World

Once I finally manage to sell down my single stock holdings over the next 5 years, my portfolio will follow one index, but use 3 funds to achieve it primarily.

nanameg
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Re: If not 3 fund, whats your strategy ?

Post by nanameg » Wed May 27, 2020 11:31 pm

David Jay wrote:
Wed May 27, 2020 8:52 pm
nanameg wrote:
Wed May 27, 2020 8:07 pm
Olemiss540 wrote:
Wed May 27, 2020 7:26 pm
1 fund portfolio (target retirement). No need to tinker and risk behavioral mistakes when savings rate and market performance is all I am chasing!

Ask yourself why market returns would outpace 80%+ of investors portfolios.
Not clear what u mean by saying “ ask yourself why market returns would outpace 80%+ of investor’s portfolios”?

Are u saying 80% + of investors use target funds? I’m confused.
Meg:

80% of investors under-perform the market. Many of the reasons are behavioral: When it comes to investing, humans seem to be wired to do the wrong thing (see “risk aversion” and “flight response”, for instance).

I believe that Ole’ Miss is saying that a single “fund-of-funds” like a Target Date does the rebalancing for you, so one is not tempted to make emotion based changes.
Thank you Paul. I did that exact thing this March and “ locked in” an around 300 k loss.
I think if I had had a TDF I would have done the same thing..in fact it would have beenefen easier to do.

I think understanding what the risks of investing entail and some the history of bear markets is much more helpful in battling emotion based changes than just having everything in one fund.

jtdavid
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Re: If not 3 fund, whats your strategy ?

Post by jtdavid » Wed May 27, 2020 11:31 pm

IRAs: LifeStrategy Growth
Taxable: Total World Stock Index
6 months' worth of expenses in cash

I have found keeping it simple keeps me from tinkering. There is no such thing as the perfect asset allocation.

nanameg
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Re: If not 3 fund, whats your strategy ?

Post by nanameg » Wed May 27, 2020 11:36 pm

I mean David.

Also I was thinking aren’t the TDF’s kind of anti boglehead? I mean maybe investors don’t do the “ tinkering” but the “ investment professionals” certainly seem to do a lot of it. Changing the compositions of the funds themselves I mean...not so much the daily rebalancing, but i think even that may be anti Bogle. I think I read that he rebalanced maybe once year and maybe even less?

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Gort
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Re: If not 3 fund, whats your strategy ?

Post by Gort » Wed May 27, 2020 11:59 pm

nanameg wrote:
Wed May 27, 2020 11:36 pm
I mean David.

Also I was thinking aren’t the TDF’s kind of anti boglehead? I mean maybe investors don’t do the “ tinkering” but the “ investment professionals” certainly seem to do a lot of it. Changing the compositions of the funds themselves I mean...not so much the daily rebalancing, but i think even that may be anti Bogle. I think I read that he rebalanced maybe once year and maybe even less?
deleted

Cyanide123
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Re: If not 3 fund, whats your strategy ?

Post by Cyanide123 » Thu May 28, 2020 4:04 am

All retirement accounts are Target funds. Which are technically 3 fund portfolio in themselves.

The post tax personal accounts are vti, vxus and a mix of BND and vteb

Kepe
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Re: If not 3 fund, whats your strategy ?

Post by Kepe » Thu May 28, 2020 5:04 am

My funds:
90% Vanguard FTSE All-World UCITS ETF (USD) Accumulating
10% iShares Core Global Aggregate Bond UCITS ETF EUR Hedged (Acc)

Olemiss540
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Re: If not 3 fund, whats your strategy ?

Post by Olemiss540 » Thu May 28, 2020 6:09 am

nanameg wrote:
Wed May 27, 2020 11:36 pm
I mean David.

Also I was thinking aren’t the TDF’s kind of anti boglehead? I mean maybe investors don’t do the “ tinkering” but the “ investment professionals” certainly seem to do a lot of it. Changing the compositions of the funds themselves I mean...not so much the daily rebalancing, but i think even that may be anti Bogle. I think I read that he rebalanced maybe once year and maybe even less?
Vanguard target retirement funds are basically a low cost automated 4 fund portfolio. They are not "tinkering" with investment strategies, they are extremely diversified products meant to glide ones asset allocation as one gets closer to retirement. Vanguard does not sell them as a means to "beat market returns" but as a way to achieve market results at an extremely low cost without the need for rebalancing manually.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

bgf
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Re: If not 3 fund, whats your strategy ?

Post by bgf » Thu May 28, 2020 6:17 am

nanameg wrote:
Wed May 27, 2020 11:36 pm
I mean David.

Also I was thinking aren’t the TDF’s kind of anti boglehead? I mean maybe investors don’t do the “ tinkering” but the “ investment professionals” certainly seem to do a lot of it. Changing the compositions of the funds themselves I mean...not so much the daily rebalancing, but i think even that may be anti Bogle. I think I read that he rebalanced maybe once year and maybe even less?
Vanguard Target Date Funds are cheap, broadly diversified funds that are rebalanced and reallocated for you along a glidepath, reducing the risk of behavioral mistakes in addition to all the risks any low cost passive diversified portfolio reduces.

Its an excellent choice even if more expensive than a 2 or 3 fund because you get something for that cost - automatic rebalancing and glidepath.

Over the past few months we've seen many posts of people frozen who wouldn't properly rebalance. That problem is solved.

Will it save someone from selling everything? No. But that applies to all investments that the investor has control over.

A target date fund is a default option, as is usually the case, some can improve upon the default, many can do far worse.
Last edited by bgf on Thu May 28, 2020 6:20 am, edited 1 time in total.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

Olemiss540
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Re: If not 3 fund, whats your strategy ?

Post by Olemiss540 » Thu May 28, 2020 6:18 am

nanameg wrote:
Wed May 27, 2020 11:31 pm
David Jay wrote:
Wed May 27, 2020 8:52 pm
nanameg wrote:
Wed May 27, 2020 8:07 pm
Olemiss540 wrote:
Wed May 27, 2020 7:26 pm
1 fund portfolio (target retirement). No need to tinker and risk behavioral mistakes when savings rate and market performance is all I am chasing!

Ask yourself why market returns would outpace 80%+ of investors portfolios.
Not clear what u mean by saying “ ask yourself why market returns would outpace 80%+ of investor’s portfolios”?

Are u saying 80% + of investors use target funds? I’m confused.
Meg:

80% of investors under-perform the market. Many of the reasons are behavioral: When it comes to investing, humans seem to be wired to do the wrong thing (see “risk aversion” and “flight response”, for instance).

I believe that Ole’ Miss is saying that a single “fund-of-funds” like a Target Date does the rebalancing for you, so one is not tempted to make emotion based changes.
Thank you Paul. I did that exact thing this March and “ locked in” an around 300 k loss.
I think if I had had a TDF I would have done the same thing..in fact it would have beenefen easier to do.

I think understanding what the risks of investing entail and some the history of bear markets is much more helpful in battling emotion based changes than just having everything in one fund.
What was your portfolio in March before and after your sell off?

As to the behavioral mistakes inherent in a "tinkerers" portfolio, having tilts, manual selling/buying (rebalancing), etc lends itself to investors spending more time thinking about strategy and acting on their thoughts. I made one purchase decision and then automated the investment process and am certain I will mirror the market unless I intervene.

The more a human intervenes in the process, the more prone they are in modifying their approach due to performance chasing, market timing, and selling low/buying high. Its human nature to act off of ones emotions and it's hard to watch another fund have success and sticking to your gameplan. These errors have proven time and again why dead people have been shown in studies to outperform their live counterparts.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

nanameg
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Re: If not 3 fund, whats your strategy ?

Post by nanameg » Thu May 28, 2020 6:25 am

We have three separate retirement accounts and I’ve always looked at them as one portfolio. I see that some posters do different things with different accounts...does that make sense if you aren’t doing it just for for tax reasons? All our accounts are tax advantaged? Shouldn’t all accounts be part of one overall plan and the portfolio seamless?

RadAudit
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Re: If not 3 fund, whats your strategy ?

Post by RadAudit » Thu May 28, 2020 6:42 am

SmyleBogle wrote:
Wed May 27, 2020 5:49 pm
What's your strategy been and what are your gains or lessons learned over your investing timeframe?
My strategy is basically (1) I recognized, after about 20 years, that I wasn't really any good at this stuff. And, I wasn't ever going to get good at it either. So, (2) I "adopted" a Vanguard four fund (world) portfolio as a model and started working to get my portfolio in line with the model. (William Sharpe's 1995 article on "The Arithmetic of Active Management" was fairly persuasive at the time, although I've forgotten most of it by now.)

Over the next decade or so, I worked my AA down to 50 / 50 stocks and bonds because I figured (believed, hoped) that type of portfolio would probably provide us adequate cash flow and growth - when combined with SS and a small pension - to support our lifestyle as long as we needed after I retired. And, I wasn't going to get rich anyway and if I left too much to the kids, they or the grandkids would blow through it sooner or later. So, why bother?

Then, recently, I found out my wife had no interest in rebalancing a four fund portfolio so I converted everything to a couple of LifeStrategy funds to match the portfolio AA. I'll simplify down to one fund when I get into my late 70's or 80's. So far, that last move has behaved well enough with less hassle / anxiety. Maybe I should of got there sooner. Don't know.
Last edited by RadAudit on Thu May 28, 2020 8:48 am, edited 1 time in total.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

Olemiss540
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Re: If not 3 fund, whats your strategy ?

Post by Olemiss540 » Thu May 28, 2020 6:54 am

nanameg wrote:
Thu May 28, 2020 6:25 am
We have three separate retirement accounts and I’ve always looked at them as one portfolio. I see that some posters do different things with different accounts...does that make sense if you aren’t doing it just for for tax reasons? All our accounts are tax advantaged? Shouldn’t all accounts be part of one overall plan and the portfolio seamless?
It's usually for two reasons:

1.) Tax reasons - if you have multiple accounts with some being Roth, some taxable, some pre-tax, it is recommended you put the most tax efficient assets in your taxable account, highest growth assets in your Roth accounts, and tax inefficient assets in your pretax account. This is covered in the wiki if you want to read further.

2.) Ease of rebalancing. If you have multiple tax advantaged accounts and are in multiple funds, it's easier and less time consuming to rebalance ONE account to sell equities or bonds than it is to log into EACH account and sell a respective amount in each account. Since it's all one portfolio, each sub account doesn't need to have the exact same asset mix. This is another reason an all in one fund like a life strategy or target retirement fund is very convenient.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

nanameg
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Re: If not 3 fund, whats your strategy ?

Post by nanameg » Thu May 28, 2020 7:43 am

I was mirroring something close to TDF 2025. We have three accounts and I never felt comfortable with international funds after reading John Bogle but I followed what the PAS told me in 2015 and again in 2018 when I had 2 annual checkups.

When the market plummeted so rapidly I sold off the international stocks...after reading Jason Zweig’s recent column in WSJ in March saying it hurts more to lose than it feels good to gain and the regret of having done nothing is particularly painful. Obviously in hindsight that was a mistake. I probably also misinterpreted his column.He was recommending incremental changes based on what was happening..understanding your TRUE risk tolerance.

I couldn’t “ stay the course” because I didn’t have a personally thought out course...I was just following something I hadn’t thought through for myself and didn’t understand...but something that had been working out “ fine” for some time. I looked at our balances only quarterly and things seemed fine until March.

I went back in after signing on with PAS in April and he can only manage two of our accounts, the third is an employer 401k. He put us at 45/55 with 18% international stock and 17 % international bonds. The 401k I have at 50/50 total US index Funds.

I’m unsettled with this arrangement still. It’s too complex and I really don’t want to use PAS. I want simple...and simple enough to not be dealing with an advisor. I’m deciding between a 3 fund or 2 fund portfolio for all three accounts.

I won’t be happy with TDF’s. I like to see what I have in each fund. They are too complex for me ...too many moving parts.

I’m trying to decide whether I want international stocks.I know I don’t want the international bonds. I’ve read all the debates here on the international vs US positions and I think I may just stay away from international but haven’t decided. Im also considering including international by using the Total World Fund...again it seems illogical to me to use some variation of international if you’re using it at all...why not commit fully and use global weight if you’re going to use them?



What I want is SIMPLE...I don’t see TDF’s as simple in their composition. They may be simple for the investor but it’s not my kind of simple. I want simple and clear not simple and opaque.


I also don’t understand all the talk about rebalancing ...I found I had to do that very little ..
I don’t think buying a TDF just for the ease of not rebalancing is necessary.


I want to make a final decision I can live with through all future market drops...I never want to go through this again.

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David Jay
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Re: If not 3 fund, whats your strategy ?

Post by David Jay » Thu May 28, 2020 7:47 am

nanameg wrote:
Wed May 27, 2020 11:31 pm
Thank you. I did that exact thing this March and “ locked in” an around 300 k loss. I think if I had had a TDF I would have done the same thing..in fact it would have beenefen easier to do.

I think understanding what the risks of investing entail and some the history of bear markets is much more helpful in battling emotion based changes than just having everything in one fund.
I am for an “All of the above” approach. Learn about the market. Understand the enemy in the mirror. Set the portfolio on autopilot so one doesn’t “fiddle” with it.

William Bernstein makes the same point about understanding markets, see his reading list in every section of “If You Can”, here: https://www.etf.com/docs/IfYouCan.pdf
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Sandtrap
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Re: If not 3 fund, whats your strategy ?

Post by Sandtrap » Thu May 28, 2020 8:03 am

2 Fund Hybrid.
Keeping it simple.
The largest portfolio loses are from behavioral errors.
Focus on optimizing earnings and saving first.

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know

Coato
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Re: If not 3 fund, whats your strategy ?

Post by Coato » Thu May 28, 2020 8:04 am

We modified the Bernstein “No Brainer” a bit to do better vs. inflation because we will have pensions that exceed our yearly spending:

25% S&P 500 (Vfinx)... thinking about QQQ
25% Small Cap Value (IJS)
25% International Small including EM (VSS)
25% Short Term Treasury and CDs

Would really like to go 75% Schwab Robo (the 94% equity version) 25% STT, but we are restrained by 403b choices and taxables...

Nowizard
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Re: If not 3 fund, whats your strategy ?

Post by Nowizard » Thu May 28, 2020 8:09 am

CyclingDuo: I would add: "When evaluating any investment scenario, be certain to remember that the recommendations may be accurate for most people but may not apply in your circumstances."

Tim

asif408
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Re: If not 3 fund, whats your strategy ?

Post by asif408 » Thu May 28, 2020 8:14 am

I like the 3 fund and started with it, but the more I've learned the more I believe valuations play a role in longer term performance, which is my primary concern. So my stock portfolio will vary based on valuations, though it is not something I plan on making major changes to very often, maybe once every decade or so. I currently hold no bonds, though I have a few percentage of cash in high yield savings and I-bonds, and right now that is what I consider my bond portion. My equity portion (which is 95% of my portfolio) is as follows and has been since approximately early 2017:

65% Emerging Markets Value stocks
13% Global Energy Producers
12% Total International Stock
10% Global Silver & Metal Miners

So I own no US stocks or bonds. If and when US stock valuations fall and bond yields rise, I may add some down the road.

nanameg
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Re: If not 3 fund, whats your strategy ?

Post by nanameg » Thu May 28, 2020 8:44 am

Sandtrap wrote:
Thu May 28, 2020 8:03 am
2 Fund Hybrid.
Keeping it simple.
The largest portfolio loses are from behavioral errors.
Focus on optimizing earnings and saving first.

j🌺
Sandtrap, what is your 2 fund “ hybrid”?

Dandy
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Re: If not 3 fund, whats your strategy ?

Post by Dandy » Thu May 28, 2020 8:49 am

The 3 fund portfolio is a very good and simple approach. You might need to supplement that with muni bond fund in taxable if your tax bracket makes that reasonable. Also, as you approach retirement and reduce your equity exposure you might want to add some an inflation protection fund. Finally, if you have an emergency fund you might consider FDIC products or a money market fund.

I'll cover my TIRA investments which is about half of my investments. The TIRA has an allocation of about 22/78
1. Balanced Index Fund
2. Wellesley Income Fund
3. CD ladder *
4. Federal Money Market Fund *
5. Short Term Bond Index *
6. Short Term Treasury Index *
7. Intermediate Treasury Fund
8. Inflation Protected Securities Fund

* part of my plan to have X years worth of draw down dollars in "safe" products.

RMD is taken proportionately which excludes the CD ladder. If equities had a bad year I'd take it from only or mostly fixed income assets.

zrail
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Re: If not 3 fund, whats your strategy ?

Post by zrail » Thu May 28, 2020 8:57 am

SmyleBogle wrote:
Wed May 27, 2020 5:49 pm
What's your strategy been and what are your gains or lessons learned over your investing timeframe?
:moneybag
FFNOX (Fidelity Four in One Index) everywhere. My returns have been average since moving to a one fund portfolio, except for behavioral errors that I sometimes still make despite myself.

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Sandtrap
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Re: If not 3 fund, whats your strategy ?

Post by Sandtrap » Thu May 28, 2020 9:29 am

nanameg wrote:
Thu May 28, 2020 8:44 am
Sandtrap wrote:
Thu May 28, 2020 8:03 am
2 Fund Hybrid.
Keeping it simple.
The largest portfolio loses are from behavioral errors.
Focus on optimizing earnings and saving first.

j🌺
Sandtrap, what is your 2 fund “ hybrid”?
Vanguard
Total Stock
Total Bond
Balanced Index Fund
Wellington
Diversified cash/fixed

Tilt to 30/70

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know

whereskyle
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Re: If not 3 fund, whats your strategy ?

Post by whereskyle » Thu May 28, 2020 9:49 am

SmyleBogle wrote:
Wed May 27, 2020 5:49 pm
First of all, I would concur 3 fund portfolio as balanced approach to market investing. :sharebeer

Having said that, from https://www.bogleheads.org/wiki/Three-fund_portfolio, recommended Vanguard funds:

Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)

Observing threads on this forum, people do tend to follow variations of 3 fund strategy (be it different funds or efts or stocks than recommendations above in the wiki) or completely different combination of different index funds, etf, stocks.

Given that no strategy is right or wrong (who knows about individual risk appetite or the future)...

What's your strategy been and what are your gains or lessons learned over your investing timeframe?
:moneybag
My primary holdings are VT (Vanguard Total World ETF, ER .08), and VTSAX (Vanguard Total U.S. Stock Market Index Fund, ER .04). I do not hold bonds. As many have pointed out, so long as you hold a diversified portfolio that resembles the market, the only risk you face is yourself. VT and VTSAX grant me sufficient diversification (and allow me to ignore debates about what is the market: the US or the world. In a certain sense, I own both "markets"). I have stable and sufficient income, so I do not need to rely on my investments for short-term safety. If you want to protect over the short term a portion of your wealth, you should put that portion into VBTLX. Apart from that, I would simply give you this advice: buy broadly and never sell.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

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Kenkat
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Re: If not 3 fund, whats your strategy ?

Post by Kenkat » Thu May 28, 2020 10:06 am

I slant to small and value, so while Total Stock Index looks like this:

LV LB LG
MV MB MG
SV SB SG

25 25 26
06 06 06
02 02 02

My portfolio looks like this:

23 19 18
11 11 07
04 04 02

I use a mix of index and low-cost active, somewhat driven by what is available (401k for example) or by choice (Primecap for example). 70/30 stock/bond. Stocks are broken down as 45% US, 5% REIT, 15% International Developed and 5% International Emerging Markets. Bonds are mostly Total Bond Index, but also hold Intermediate Term Muni and High Yield as well. A very small allocation to commodities (part of the US equity allocation) because I am stubborn.

My goal is to modestly beat a chosen benchmark via a more diverse portfolio in terms of asset classes; I’ve been tracking returns yearly since 1999 so I used LifeStrategy Growth for awhile (I used to be 80/20) and have switched to the Target Retirement fund that corresponds to 70/30 in later years (was 2025 for awhile, now 2030).

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ruralavalon
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Re: If not 3 fund, whats your strategy ?

Post by ruralavalon » Thu May 28, 2020 10:13 am

SmyleBogle wrote:
Wed May 27, 2020 5:49 pm
First of all, I would concur 3 fund portfolio as balanced approach to market investing. :sharebeer

Having said that, from https://www.bogleheads.org/wiki/Three-fund_portfolio, recommended Vanguard funds:

Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total International Stock Index Fund (VTIAX)
Vanguard Total Bond Market Fund (VBTLX)

Observing threads on this forum, people do tend to follow variations of 3 fund strategy (be it different funds or efts or stocks than recommendations above in the wiki) or completely different combination of different index funds, etf, stocks.

Given that no strategy is right or wrong (who knows about individual risk appetite or the future)...

What's your strategy been and what are your gains or lessons learned over your investing timeframe?
:moneybag
For most people their 401k account (or other work-based acvount) is all of most of their investing portfolio.

Many times the variations are simply the result of the different and limited fund options offered in a 401k plan. For example:
1) often a 401k plan offers a S&P 500 index fund but no total stock market index fund, so you use the S&P 500 index fund;
2) often a 401k plan offers only a developed markets index fund, or no international stock index fund at all, so you settle for skipping emerging markets or use a diversified actively managed international stock fund; and
3) often a 401k plan does not offer bond index fund, so you try to find a good credit quality, actively managed, intermediate-term bond fund.

In my case for most of my working life my 401k offered only one decent fund, a S&P 500 index fund, so that is the fund I used. The 401k had a brokerage option, so I used that feature to buy individual Treasury bonds for my bond allocation.

My lesson is that you do the best you can with what you have.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

investor4life
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Re: If not 3 fund, whats your strategy ?

Post by investor4life » Thu May 28, 2020 10:14 am

My employer is in the process of changing plan administrators and I am looking at this as an opportunity to realign the asset allocation in my retirement account over the next month or so, as below.

50% S&P 500 fund (ER .02)
25% Total Bond Index (ER .03)
25% a stable value account guaranteed to pay at least 3% (backed by an insurance company with very high financial strength ratings).

Thus far the asset allocation (if you can call it that) has been a mish-mash of US large cap and sector funds plus some international and has done quite well over the past decade or so, but the pandemic-related meltdown in March/April was a reality check. (I have a roughly 10-year horizon for retirement and would like to sleep better at night :)

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